Last Minute Election Commentary And Polling Stats

Well, barring some kind of dramatic event, it does indeed look like the former First Lady is headed back to the White House thanks in no small part to FBI director James Comey’s decision to end the investigation into Clinton’s emails once and for all.

And while we’ll be deprived of many a hilarious press briefing and the possibility that a nuclear bomb will be dropped on Raqqa, we’ll be able to sleep at 3 am knowing that the President is also sleeping – not tweeting insults at Saturday Night Live.

In any case, here are some final thoughts on the election from Bloomberg’s Mark Cudmore and Citi’s Steven Englander…

From Bloomberg:

It may appear that the FBI’s latest absolution of Clinton has left little for markets to play for on the final election result. However, there’s definitely still profit to be made, and the real-world reaction hasn’t been priced at all.

Clinton being cleared on Sunday, combined with early voting data, would suggest that her victory is now just a formality. Markets have seemingly reacted in line with that view since the weekend

But the conviction in the result is so recent for markets that there’ll still be plenty of Trump-hedges to unwind this week. The Republican-victory bets have lost so much value, so quickly that the extremely asymmetric payoff should Trump win may have discouraged traders from cutting them

Latest polls now suggest that Trump’s path to victory is near-impossible. My personal prediction is for the Electoral College to favor Clinton by 323 to 215

Some assets — the dollar and the Mexican peso — will fully price in the official result very quickly. For assets like equities the reaction will be more sustained yet more nuanced. The process of new inflows from retail investors will take time to play out, and the impact on different sectors will vary substantially

More than that though, there’s a real economy beyond financial-market punting. Company directors, who may have delayed investment decisions due to political uncertainty, will soon release the hand-brake on activity. This is a slower moving driver but ultimately makes a real impact

The surprise factor may now be minimal from the next 24 hours, but there are lots of opportunities to make money still

And from Citi:

Market odds have shifted but not as dramatically as you might think. End Thursday when USDMXN was trading at 19.17, a one month USDMXN digital put with an 18 strike was cost 18.5%. With MXN now trading 18.67, the cost of a digital with same expiry is 35.7%. The cost of a USDMXN digital call with same expiry and 20 strike is now 21.2%, at Thursday close it was 32.23%. This very indicative but it seems ballpark on how odds have shifted.

A USDJPY digital put with same expiry and 102 strike was 38.9% on Thursday, it is now 24.7%. So Trump odds have gone down by maybe a third but it still seems to be leaving market thinking there is 20-25% chance he squeaks through.

Bottom line — at most 30-40% of the market move has occurred, so there is still plenty to go. The key is to know i) when market moving results will emerge (see below) and ii) how markets will react

2) Polls published today will have no or minimal effect from Sunday’s FBI announcement. Polls are generally conducted over a couple of days and take a day or two to compile. So any poll that is published would have been done on the double quick and reliability would be low.

3) Even the LA Times Dornlife poll (which has favored Trump more than any other poll) showed a slightly lower Trump margin. This is consistent with other polls showing a small gains for Hillary after a week or 10 days of her lead eroding.

4) Early voting suggests that Trump is losing in Nevada early balloting (despite conventional polls showing him ahead). It is possible that he is getting the Independent vote but we won’t know until ballots are actually counted, but if he is way behind based on early voting he has hard time making up this deficit, because early voting makes up a major percentage of total votes in Nevada. For him Colorado is a stretch – in 2012 Obama won by 5 ½% over Romney and Democrats are doing better in early voting so far. If he loses Nevada, he has to win a real Democrat state such as PA or MI or less likely WI and MN.

5) You have to be careful of early voting – they show the party affiliation of voters but not how they vote. Nor do they tell you what Independents are doing. But you figure it is longish odds if you can’t bring out the vote in your own party versus a year when they lost.

6) If Trump is going to lose, we will likely know early. All he has to do is lose a key battle ground state. His edge is high turnout among Republicans, low turnout among Democrats and some pickup in Independents – and we will likely be getting indications if he is succeeding or failing early on. The exit polls discussed below will tell us whether Democrats or Republicans are turning out. This year we will have much more information early in the day on turnout by party affiliation both because fo early voting and because so media outlets will be discussing turnout/exit polls earlier than was the case in the past. So market volatility may be earlier rather than later.

Because of early voting and early indications of turnout/exit polls market volatility may emerge earlier in the day.

It’s not a partisan issue. It’s a sane versus lunatic issue. If the GOP can figure out how to run a campaign that i) has a snowball’s chance in hell at winning, and ii) isn’t stark raving mad then I’d happily lean Republican

There are so many similarities in the structure and posturing of this election compared to 2008 (social underdog vs. blue collar American great white hope), you have to wonder if the powers that be just decided do it all over again (because we are so predictable)
– rather than come up with something new. I just wonder the $7B spent on this election cycle – would have produced if had been spent on something that actually solved some of our problems – rather than just the so obvious continuation of BAU.

I think this is just an unwillingness to accept the obvious: the GOP candidate is nuts. It was very hard for the GOP itself to admit this, but finally, prominent Republicans refused to back Trump. Again, it’s not about Democrat or Republican, it’s about sane and insane. I don’t know about you, but I don’t want insane. I wish this race would have been Joe Biden versus Paul Ryan.

By the way – and some will hate me for saying this – Elizabeth Warren would have mopped the floor with every Democrat and Republican. I think the party decided amongst themselves that Hillary deserved 4 years. That’s not to say that Warren’s policies are good, just that when it comes to debating, she will almost literally eviscerate opponents.

With the aid of hindsight, reading the insightful commentary from Bloomberg and Citi puts a humorous touch to any political perspective. Talk about swallowing polling data hook, line and sinker. Again, these guys get paid for this stuff? Are their jobs threatened by unemployed pollsters? Perhaps they should stick to analyzing possible outcomes only and put their crystal balls in long term storage.

Writing about a subject is the best
way to educate yourself about it, and when I flick through past work I remember how much
they taught me, if no one else. Mainly they taught me that I didn’t know very much. But they
also taught me that most other people didn’t know much either. Thus, some key themes
which stand out include the illusory control of policy makers, the presumed knowledge of
those looking to them to actively do good, the ease with which we fool ourselves, and how
best to protect capital in the face of such unavoidable uncertainty. -- Dylan Grice